OSFI Finalizes Guideline on Large Exposure Limits for D-SIBs in Canada
OSFI released the final version of its Guideline B-2 on large exposure limits for domestic systemically important banks (D-SIBs), with an effective date of November 01, 2019. OSFI also published the guideline impact analysis statement. The Canadian D-SIBs are expected to implement the final version of this guideline in the first quarter of 2020. The consultation on the guideline took place from December 2018 to February 2019. OSFI has issued a summary of comments received and explained how the comments have been addressed in the final guideline.
The new version of Guideline B-2 includes the following:
- Introduces tighter limits for exposures to both global systemically important banks (G-SIBs) and to other Canadian D-SIBs
- Recognizes eligible credit risk mitigation techniques by measuring exposure on a net basis rather than on a gross basis
- Reduces the eligible capital base from total capital to tier 1 capital
The guideline, which was originally issued in 1994, establishes limits for the exposure of a bank to a single counterparty (including connected counterparties), measured as a percentage of capital. In 2014, BCBS published its standard on large exposure risk management. The final guideline of OSFI incorporates the BCBS guidance to reflect current risk management sound practices and provides additional guidance on the methods that OSFI expects D-SIBs to use for identifying, measuring, managing and monitoring large exposures.
Related Links
Effective Date: November 01, 2019
Keywords: Americas, Canada, Banking, Large Exposures, Basel III, D-SIBs, Concentration Risk, Guideline B-2, OSFI
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
BCBS Issues Basel III Monitoring Updates in August 2019Related Articles
PRA Finalizes Approach to Supervision of International Banks
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
FCA Issues PS21/9 on Implementation of Investment Firms Regime
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
IOSCO Proposes Recommendations on ESG Ratings and Data Providers
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
EC to Defer Application of SFDR Standards Till July 2022
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
EBA Seeks Views on Proportionality Assessment Methodology
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
US Agencies Propose Changes to Call Reports and Instructions
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
EBA Examines Asset Encumbrance in Banking Sector
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
